Achieving a Successful Retirement Part 4: Rising Income Investments
Hi, I’m Chad Ekren.
Thanks for joining us. The greatest threat to your retirement income is the RISING COST OF LIVING. At a 3% inflation rate $60,000 of income today must be $93,000 in 15 years! Not 30 years, which could be the amount of time you live in retirement, but in just 15 in years your $60,000 will need to grow to $93,000.
The best way to overcome INFLATION is by owning RISING INCOME INVESTMENTS which are stocks of the great companies of the world who have constantly rising earnings and ever increasing dividends. Today, we will share a real life, 14 year example of 60 great Canadian businesses which comprise the iShares S&P/TSX 60 Index. The Top 10 holdings of this investment include many companies you are very familiar with:
Top 10 Stocks as of June 2014
|ROYAL BANK OF CANADA ORD||8.05%|
|TORONTO DOMINION ORD||7.37%|
|BANK OF NOVA SCOTIA||6.32%|
|SUNCOR ENERGY INC.||4.84%|
|CANADIAN NATIONAL RAILWAY COMPANY||4.15%|
|CANADIAN NATURAL RESOURCES LIMITED||3.89%|
|BANK OF MONTREAL ORD||3.69%|
|VALEANT PHARMACEUTICALS INTERNATIONAL||3.02%|
|MANULIFE FINANCIAL CORP||2.90%|
Source: iShares by Blackrock website: www.ishares.com
Price & Dividend Chart of S&P/TSX 60 Index ETF (XIU)
Source: iShares by Blackrock website: www.ishares.com (Jan. 2000 – December 2013)
The chart you’re looking at shows the price changes and dividend payments of the ishares TSX 60 Index over the past 14 years. This was an extremely difficult time for investors, especially for retirees. In fact, some people compared this period to the Great Depression era of the 1930’s. Interest rates were well below average during these 14 years at just under 2% per year (Source: Bank of Canada).
Governments lowered interest rates to all-time lows with the hope of stimulating economies. We experienced two SIGNIFICANT price declines including: The bursting of the Tech Bubble and the Financial Crisis during the “Great Recession”. Yet, despite this difficult period, many of the best businesses in Canada, and around the world, performed reasonably well and ultimately rewarded the PATIENT, FAITHFUL investor.
The share price of the TSX 60 only grew at about 3.5% per year or almost 64% during the full 14 years, which is well below normal. But incredibly, the dividends of the TSX60 index grew at an overall rate of approximately 10% per year, or 289% over the full 14 years.
And isn’t that what you need in retirement? Ownership in a broadly diversified portfolio of excellent businesses who grow their earnings and dividends at a much fast rate than inflation. We call these great companies RISING INCOME INVESTMENTS.
Before you go, I need to ask you: “Do you know your Successful Retirement Number?” That is the amount of money you need to achieve a lifestyle-sustaining income and a legacy for those you love.
If you don’t know your number, you need to. If you wish, give us a call and we’ll help you figure it out. I encourage you to watch our next video where you’ll learn why Investor Behaviour is the final key concept in helping you achieve Your Successful Retirement.
This video was prepared solely by Chad Ekren, Joe Goncalves, and Geoffrey Perrin who are registered representatives of HollisWealth®, a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). The views and opinions, including any recommendations, expressed in this video are those of Chad Ekren, Joe Goncalves, and Geoffrey Perrin alone and not those of HollisWealth®. Capital Concepts and Capital Concepts Group are personal trade names of Chad Ekren. HollisWealth®, a trade name of Investia Financial Services Inc.